As most banks were busy weathering the fallout from the financial crisis, in mid-2009 Patelco Credit Union already was looking to the future. The Pleasanton, Calif.-based institution sought to improve its competitive position by enhancing its electronic bill pay functionality with person-to person (P2P) payments. "We saw it as an opportunity to improve customer retention and position ourselves strategically," explains Anthony Vitale, Patelco's VP for information technology.

Patelco ($3.6 billion in total assets) started its journey by evaluating three vendors in the emerging P2P space. Initially, the credit union focused on online banking, Vitale relates, but it quickly realized that mobile P2P was critical as well, and ultimatley selected New York-based CashEdge (which was subsequently acquired by Brookfield, Wis.-based Fiserv). "At the time, CashEdge was poised to be a market leader in the space," recalls Vitale. "And its SaaS-based Popmoney rose to the top as the best solution overall."

According to Vitale, implementing the solution required coordination between CashEdge and Patelco's cloud-based mobile channel provider, MShift (Freemont, Calif.). Starting in December 2009, he reports, the two vendors worked on an interface. Meanwhile, Patelco managed the relationship, drafted P2P policies and conducted end-user testing.

While no significant challenges arose from a technology or institutional perspective, a user adoption hurdle quickly became clear, Vitale says. "Making a payment is easy -- senders just need a recipient's email address, cell phone number or bank account information," he explains. "But the recipient's experience isn't as easy or seamless. They must log into the Popmoney portal and enter their account number, routing number and other information. Fortunately, for recurring payments, the Popmoney portal pre-populates such information."

Still, Patelco pressed on and, according to Vitale, in April 2010 beat all other U.S. institutions to market with P2P for both the online and mobile channels. Since then, Vitale adds, adoption has grown at a steady 10 percent per month, despite minimal marketing efforts. "We just added a link to it on our online site and issued a news release," he says. "Functionally, this means customers are finding the product on their own."

Usage trends have proven revealing, Vitale notes. Rather than dividing up their restaurant bills, as touted by early P2P vendors, for example, Patelco's members are using the solution for recurring payments such as rent. "So our average payment is $644," Vitale reports.

But nearly 2 percent of payments aren't claimed during the 60-day window that Patelco's P2P policy allows, Vitale acknowledges. The most common reason: The recipient fails to log in to the portal. "So the challenge for the [financial services] industry is educating consumers," Vitale observes. "Long term, our industry needs to streamline the recipient's processes with real-time payments."

Regardless, Patelco considers the adoption a big win. "It's the best alternative out there because you can send money electronically to anyone without the sender or receiver having to exchange financial information," Vitale points out. "We expect more people will turn to P2P as the large institutions market their offerings," he adds. "When they do, we'll be ready."